BoA ramps up capital by Rs 767 cr

Bank of America (BoA) has joined the list of foreign banks bringing in capital to expand their operations in India. BoA today announced a capital infusion of $150 million (Rs 767 crore), perhaps the single largest capital injection by a foreign bank.

The fresh capital addition has taken its total tier-I capital to Rs 1,400 crore. It has committed addition of another $25 million (Rs 110 crore) to tier-II capital in the next couple of months, which will take the total capital funds of BoA in India to Rs 2,000 crore.

The recent large capital infusions were by Hongkong and Shanghai Banking Corporation (HSBC) and Singapore's DBS Bank. HSBC infused $180 million in 2004-05, but a portion of it was by retaining profits from Indian operations.

It plans to boost its capital by another $63 million by July 2005. DBS Bank had brought in $105 million in 2004.

BoA said it committed additional capital to Indian operations to meet the single and group borrower exposure limits and also to fund its expansion.

Banks are allowed to take single and group borrower credit exposure up to 15 per cent and 40 per cent of their capital funds, respectively.

Banks can have additional single and group exposure limits of 5 per cent and 10 per cent of capital funds, respectively, for lending to infrastructure sector.

BoA's managing director and country head, Vishwavir Ahuja said, "The $150 million capital infusion has given us room to grow and to tap the huge growth potential. The increased capital base also enables the bank to grow its business further in India with existing clients and adding new clients."

The $150 million capital infusion is with effect from April 1, 2005.

The boost to BoA's capital base will enable the bank to maintain and grow its balance sheet and credit exposure levels based on prudential limits prescribed by the RBI.

Mr Colm McCarthy, president, Asia, Bank of America, said, "Our Indian franchise has an excellent track record and has always delivered superior returns. The additional capital will allow the bank to maintain and improve its exposure to top- tier clients in India over the years and generate appropriate returns."